10 POWER RULES FOR SAFER REAL ESTATE INVESTING
1. Treat it (The Game of Real Estate) as a business … because it is!
If you have a business mindset with all your dealings, you will automatically have a professional hat on’ as it were. It will also remind you to keep your emotions in check when making decisions with respect to your real estate dealings.
2. Build a strong support team!
Seek out good council and stick with them. Like a tenant you will need to screen their credentials to ensure that they are familiar with the nuances and details of real estate in their particular field. Pay for talented experts; as the CEO or GM of your real estate hockey team you deserve to be well informed and protected to make sound decisions. Real estate lawyers, accountants, trainers, appraisers, and if you must ..real estate agents.
3. Take time to learn your marketplace!
You need to know what the RETAIL price of bungalows, two stories, and condos are in your area with respect to age and condition. If you know the retail price, you will know when you come across a bargain. A real estate agent will help with this one, but your own driving around and calling on signs works too. Talk to some For Sale By Owner’ (a.k.a. FSBO’s or fizzbo’s) properties too. Learn what the market rents are in each category, visit a few so you have an idea as to what condition of place draws the best rent, and proceed with your product to market accordingly.
4. Consider and account for ALL your upfront purchase costs!
These get missed a lot. Get to know what all your costs will be to close on the property as in addition to any cash downpayment, these little ones can add up and leave you with requiring more than you expected to take to the closing. Legal costs and disbursements, tax credit adjustments, insurance (to be paid and arranged before closing)condo fees costs, any outstanding municipal or condo board levies, etc. These can reach the thousand dollar or so range so find it all out beforehand. (your lawyer can assist with this if you ask him/her)
5. Analyze the deal but, be mindful of Analysis/Paralysis!
Look at all the numbers, the down payment, expected rental income, repairs to be made, maintenance costs, property management costs, condo fees, insurance, vacancy allowance, extra cash for an "Emergency fund" (for those nigglety figgelty unexpected things – budget 2 to 3 months of mortgage payment as a rule of thumb) and then decide if it is for you. Be careful not to let your fear of getting going stand in your way of proceeding with a good deal. Bounce it off your investing peers to ease your comfort level and understanding.
6. Screen your tenants!
It is better to leave your rental unit vacant than to settle for a questionable tenant. Getting a trouble tenant out that outright snubs and stick-it-in-your-face refuses to leave is a time consuming process. There are also additional costs involved to physically chuck a tenant out if you have to and some Pepto bismol action may also be required to keep your sanity. If you find yourself with one of these "beasts", bite the bullet and take a proactive stance. Immediate and swift action is what you need to minimize your losses. Check references, personal and financial; interview previous landlords (particularly the landlord before their current one if possible); get all their contact information, including next of kin with addresses and phone numbers, banking information, work information, and have them give signed consent to a credit check. Meet with them personally to get a gut read as this will come into play too. Check ALL information, don’t be rushed, or let yourself be rushed by the applicants. Then, select your tenant, remembering Rule#1. Remember, better to leave it vacant ……
7. When you make mistakes, learn from it and keep feeding your education!
Mistakes do happen and will happen. It’s part of any worthwhile growth in this game it is no different. Learn what you need to learn up front to try to avoid mistakes, but learn from what the street has to teach you. Learning from mentors and peers will minimize but not eliminate them. Don’t let the fear of making mistakes squash your dreams of becoming a successful investor. I made mistakes, my peers have made mistakes, and will continue to do so. It is an inevitable price for rising to the top 5% of the players. Even Wayne Gretzky or Michael Jorden didn’t hit the net every time. Why should you expect any different. Keep learning new things, new ideas and strategies, share them with your peers and they’ll return the favor. This is not a ‘lone wolf’ kind of business. Use your network to your mutual benefit.
8. Associate with like-minded and "positive" people! Join a real estate investment group!
In the interest of maintaining your "spark and enthusiasm" it is critical that you preserve your confidence at all costs. Traveling with a pack that moves in the same direction as you and has the same direction in mind with their investment goals as you have is important to keep you going. Hang out with people like those in theReal Estate Investment Network. (for Membership details call them at 1-888-824-7346. I am sure there will be plenty of people with their free advise telling you that you can’t or won’t succeed in this business, because they are either jealous of your aspirations or simply think they Know better. Stay away from these characters like the plague, as they will pour cold water all over your plans and dreams. This can prove quite challenging as sometimes, they live in the same house you do! Good groups should be investigated as to how they will help support you, improve and upgrade your education, and keep you up to date on current events of your area and the world, as they pertain and affect your real estate goals. Build a significant network of like minded professionals and investors to
strategise and invest with.
9. The use of OPM (Other People’s Money)
If you are limited on your own money, climb over that obstacle. If you are long on time and are keen to put in the time to educate yourself, find and prepare a good deal, a joint venture partner with cash to use can help get you going. Let this be your motto: "If a good deal comes along, the money will appear!" Get in the game and don’t let anything stop you, even lack of personal money.
10. Have Fun!
Rule#1 talks about this being a business, but Real Estate for me is truly fun. I am working on this part time, and it is a lot of fun finding good deals, putting deals together, and buying, selling and holding property. It is an absolute gas and I love it. Let me as you, if you don’t have fun with the things that you are doing then why are you doing them? Investing in real estate is a fun way of securing a financial future for you and your family. With some education and support, you can make the experience virtually risk free!
Good Luck and I’ll see you in the trenches!
Valden Palm
Mister RRSP
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